Risk of Operations in International Supply Chain Management

Introduction 

General supply chain management refers to the movement of products and services on an international scale the companies involved seeking to operate beyond set national boundaries. Multinational companies often seek to make use of a trans-national global network as part of maximizing on their ability to move products and services across borders; thus, enabling them to capitalize on their profits while minimizing waste. The value placed on international supply chain management is that it allows companies to reduce the cost involved in managing its supply chain. However, it is equally important to take note of the fact that the supervision of a company's supply chain on a global scale may also bring out several risks affecting companies' operations. The evaluation of these risks is essential to allow companies to develop an effective risk management plan to advance their capacities to deliver products and services to their international customers.

International Supply Chain Management 

When evaluating supply chain management, as it occurs on a global scale, one takes note of the fact that it focuses on six main areas that define the success for companies involved in this approach to the delivery of products and services. These areas are the management of logistics, competitor orientation, customer orientation, coordination of supply-chain activities, management of supply, and management of operations. Companies engaged in the distribution of their products and services within the global market are expected to concentrate on the areas indicated as a way of building their capacities to maximize international supply chain management. Tang & Musa (2011) suggest that most often companies fail in the distribution of products or services globally due to their inability to consider specific market aspects that are defined by the dynamics within the particular consumer markets they intend to operate.

Overall supply chain management also depends on a company's adherence to the regulations that have been put in place in the individual countries within which it intends to operate as part of its approach to the delivery of products and services. The success of companies engaging in international supply chain management is also defined by their adherence to the regulations that have been set by both government and non-government agencies that operate within the global consumer market. Each country has its standards on the products or services that are to be delivered to consumers, which creates the need for a company always to ensure that it complies with this regulation (Norrman & Lindroth, 2004). The consideration of standards set by non-government agencies, which include the United Nations, among others, may also determine the overall levels of success that a company will achieve.

Operational Risks Impacting International Supply Chain Management 

Although international supply chain management may being out possible successes for companies, especially in defining their capacities to take advantage of the global market, it also brings about a wide array of risks that may impact a company's operations. It is essential for companies to consider the implications that these risks are likely to have on their activities, as this would them to develop and implement strategic approaches to reduce the impact of these risks. Additionally, the evaluation of these risks will also help in ensuring the companies involved are in a much more viable position to adopt strategies that are likely to define their successes while operating in the global consumer market.

The following is an analysis of some of the notable risks that are likely to impact international supply chain management operations:

Political and Government Changes 

Political instabilities are one of the most unusual risks that multinational companies are likely to experience, which may impact on their activities in a significant way. An example can be seen for companies that operate within Europe, which have been adversely affected by Brexit, which has resulted in volatility and weakening the British pound. Sodhi, Son, & Tang (2012) indicate that companies engaging in supply chain management on an international scale often find themselves facing a dilemma on how to manage risks arising from political instabilities. On the other hand, it is much more likely to encounter changes adopted by governments on areas such as taxation, which affects the operations for companies importing or exporting products or services. The implication of these instabilities and changes from a trade perspective is that they tend to result in difficulties for the companies in their bid towards maximizing their operations.

Economic Instability 

Economic instability is viewed as one of the critical threats impacting global trade, as it creates a situation where companies find it hard to determine how the economy is likely to behave within a given period, which affects their operations significantly. Companies engaged in supply chain management from a global perspective also face a significant challenge in dealing with risks associated with economic instabilities within the different countries within which they operate. Economic downturns portend a significant decline in profitability for the companies involved, which also impacts multinational companies that are engaged in providing different products and services to the consumers within these countries (Blos, Quaddus, Wee, & Watanabe, 2009). The challenge for these companies is that they find it hard to meet their profitability targets considering that the consumption rates for their products or services will reduce significantly.

Connectivity 

General supply chain management is defined by the ability for companies to connect different consumer markets as part of their operations, especially in seeking to ensure that they can capitalize on the shifting demands among consumers (Manuj & Mentzer, 2008). However, connectivity also serves as a significant risk to the operations for companies involved in international supply chain management, as there exists a lack of integration in the systems used in different consumer markets. The lack of connectivity has created a situation where some products are likely to be accepted within specific markets but are likely to be rejected in others, which becomes a critical risk of consideration for the companies involved in the delivery of the products and services. The challenge for the companies is trying to find uniformity in the consumer markets to ensure that their products will be accepted in the different markets.

Data Integrity and Quality 

Data integrity is one of the critical factors that companies often consider when making decisions on their approaches to supply chain management both locally and internationally, as the data collected will help in providing insight on how the market functions. The risk that this portends for the companies involved is that they often find themselves encountering instances where the integrity and quality of data that they use when making decisions is compromised. Ultimately, this results in companies making supply chain management decisions that do not reflect on the actual market dynamics. The possibility of failure in such cases increases significantly, as the products or services that the companies import may not meet the needs and wants of the consumers within the specific markets.

Supplier Consistency 

According to a study on multinational suppliers, Tummala & Schoenherr (2011) take note of the fact that more than half of suppliers have not adopted a business continuity plan that would allow them to continue with their operations after they have encountered a disaster that is likely to impact on their services. Raw and reclaimed materials are most affected when dealing with disruptions, which affects the operations for companies involved in the manufacturing of products that are to be delivered to consumers in international markets. For companies engaged in global supply chain management, this brings out a significant risk to their operations, as it becomes harder for them to actualize on their plans to deliver their products or services to the different consumers in international markets.

Transport Loss 

The ability for companies to advance their transportation network is one of the critical determinants of their success in actualizing operations involved in international supply chain management. Chen, Sohal, & Prajogo (2013) take note of the fact that even carriers that have invested heavily in building their transportation networks often encounter a wide array of setbacks that affect their capacities to deliver products or services in specific markets. It is from this point of view that this can be viewed as a significant risk to the operations for companies involved in supply chain management on a global scale. The danger is that these companies may find it hard in meeting some of their set targets attributed to a lack of an active transport network, which is one of the critical elements to consider when defining success in international supply chain management.

Cyber Attacks 

Modern supply chain management has encountered significant risks attributed to an increase in cyber attacks that are often directed at companies that focus much of their attention on building a proactive approach to maximizing their management of supply chain. EEE indicates that one of the most predominant reasons that some companies find themselves experiencing cyber attacks targeting their supply chain is to force an increase in freight rates. Primarily, this has impacted the ability for specific companies to actualize on their plans in seeking to build active supply chain networks. Additionally, this has also affected the ability for the companies to ensure the costing of their products or services is minimized, as cyber-attacks often impact their rates significantly.

Recommendations on Reducing Operational Risks 

From the evaluation of the operational risks, as have been discussed in the previous section, companies engaged in international supply chain management may need to make several changes to their operations to reduce their exposure to these risks. The first recommendation for the companies involved would be ensuring that they engage in an in-depth market analysis for the different consumer markets that they intend to deliver their products or services. By conducting a market analysis, the projected outcome is the companies will be in a better position of having to identify possible markets that face economic or political instabilities. Consequently, this would mean that their approach these markets would be different when compared to approaches for markets that do not introduce such risks. The companies will seek to cushion themselves from possible instabilities that are likely to affect their operations, primarily focusing on their implications on profitability.

The second recommendation for the companies is for them to engage in partnerships with companies within the different consumer markets as a way of minimizing costs of operations, especially in markets where their operations are limited. Companies engaged in international supply chain management often find themselves experiencing significant challenges when trying to gain entry into specific consumer markets, which impacts the success of their operations. Seeking international partnerships may help in minimizing these challenges considering that the companies will be in a better position of having to advance their operations using their international partners. Additionally, this would also mean that the companies involved may find it much easier when seeking to capitalize on their understanding of the markets to increase their operations in a manner that would be effective to advance their profit margins while minimizing operational risks.

Conclusion 

International supply chain management refers to the movement of products and services on an international scale the companies involved seeking to operate beyond set national boundaries. Although international supply chain management may being out possible successes for companies, it also brings about a wide array of risks that may impact a company’s operations. Political instabilities are one of the most notable risks that multinational companies are likely to experience. A lack of connectivity has created a situation where some products are likely to be accepted within specific markets but are likely to be rejected in others, which becomes a key risk of consideration for the companies involved in the delivery of the products and services. Some of the other risks include supplier consistency, transport loss, and cyber attacks. Some of the key recommendations to deal with these risks include ensuring that they engage in an in-depth market analysis for the different consumer markets that they intend to deliver their products or services and engaging in partnerships with companies within the different consumer markets.

References

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Chen, J., Sohal, A. S., & Prajogo, D. I. (2013). Supply chain operational risk mitigation: A collaborative approach.  International Journal of Production Research ,  51 (7), 2186-2199.

Manuj, I., & Mentzer, J. T. (2008). Global supply chain risk management strategies. International Journal of Physical Distribution & Logistics Management ,  38 (3), 192-223.

Norrman, A., & Lindroth, R. (2004). Categorization of supply chain risk and risk management. Supply chain risk ,  15 (2), 14-27.]

Sodhi, M. S., Son, B. G., & Tang, C. S. (2012). Researchers' perspectives on supply chain risk management.  Production and operations management ,  21 (1), 1-13.

Tang, O., & Musa, S. N. (2011). Identifying risk issues and research advancements in supply chain risk management.  International journal of production economics ,  133 (1), 25-34.

Tummala, R., & Schoenherr, T. (2011). Assessing and managing risks using the supply chain risk management process (SCRMP).  Supply Chain Management: An International Journal ,  16 (6), 474-483.